Price Variations on Automatic Washing Machines in Chicago, Illinois, Among Different Types of Retail Outlets

Abstract

D ISCOUNT pricing and the institution that has done much to promote its growth-the discount househave been receiving a great deal of attention in recent literature. There is, however, very little reliable evidence on price variations on goods that are discounted, by type of outlet The present study, designed to provide some such evidence, is concerned with the extent of discount pricing on a consumer durable good in Chicago, Illinois, and with the variations in cost to consumers between so-called discount houses and other types of retail outlets. In measuring real differences in cost, the selling price was only one of the costs considered. Costs of delivery and installation and differences in guaranty or period of free service were included. Information was also gathered about the credit terms available and the interest or carrying charges at each of the outlets contacted. Secondary purposes of the study were to determine whether there existed major differences in cost to consumers among the major brands and whether brands with a lower volume of sales (less brands) were priced differently than those with a higher volume of sales (major or brands). The concept of whether discount houses carried or pushed only major brands or whether there was a tendency to promote brands by discounting them more heavily also seemed worthy of exploration. The study was conducted in March, 1955. It shows that price differentials exist among different types of retail outlets selling automatic washing machines. Discount houses did offer cost advantages to the consumer, but the savings were not so great as some may believe. Every retailer contacted offered a discount, and this discount was approximately the same on every brand he stocked, including the so-called less popular brands. Method of investigation.-This study attempted to determine the average cost to the consumer of purchasing an automatic washing machine at different types of retail outlets. The information obtained at each retail outlet included all the following: the listed price, the selling price, installation and delivery costs (most dealers included one or both of these costs in the selling price), length of time of the guaranty or warranty period (period of free parts and service), and carrying charges on a $200.00 balance for one year, payable in twelve equal monthly instalments.' All interviews for the study were made by one person, the author, to eliminate differences in approach, questions asked, or bargaining ability. The interviewer posed as a prospective purchaser. A standardized approach and shopping procedure were followed in all instances. The interviewer made it clear that he